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Fiscal Management Techniques

Fiscal Management Techniques

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Published by: adityaap on Sep 13, 2010
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FISCAL MANAGEMENT TECHNIQUES
 
DEVOLOPEMENTMANAGEMENT ANDFINANCE
ADITYA A. PUNGAVKAR
 
FISCAL MANAGEMENT TECHNIQUES.
DEVOLOPEMENT MANAGEMENT AND FINANCE Page 2
FISCAL MANAGEMENT TECHNIQUESPERFORMANCE BUDGETING
 
Introduction
Management of on going activities and control of expenditure have, traditionally, been given priority in the process of budget formulation, and execution. The use of budget primarily to keep sending in check 
was
well recognized as longas government functions were limited in scope and social value of public expenditure was
little
known. The budgetwas used for central control over inputs, such as, salaries, wages, travel expenses, materials and supplies, machineryand equipment, tool and plants, etc.The purpose of budgeting, however had to be redefined to conform to the changed view about the work andaccomplishments of public agencies, which came to be regarded as socially desired benefits
.
In the
 
changedperspective, the task of budgeting came to be regarded as the effective marshalling of fiscal and organizationalresources for the attainment of benefits. The traditional budget formats and processes came to be considered asunsuitable for an active role of the executive in the implementation of governmental programmes. A major problemthought to be tackled urgently has been to ensure an effective use of funds made available to the Executive. The effectof all this has been to treat as insignificant the amount of none, spent on an activity unless it is considered in thecontext of complex inter-relations between ends and means, which could be best pursued through closer to attention tothe concepts of efficiency and economy. Budgeting in the changed situation, has come to be considered as a tool forthe implementation of government plans and programmes. It has been regarded as a process for systematicallyrelating the spending of funds to the accomplishment of planned objectives. The wide-spread concern with decision-making processes witness of late has interwoven in it the concepts of efficiency and economy. These concepts areintimate parts of the technique of performance budgeting.According to the concept of performance budgeting, the annual budget is in essence a work plan specifyingthe programme targets to be achieved by the agency concerned during the financial year. It emphasizes the purposesfor which provision of funds is made.Performance budget is a tool of management. It lays emphasis on accomplishments rather than means of accomplishments, it seeks to bring out what the government proposed to do. how much of it, at what cost, and withwhat results. Instead of highlighting objects of expenditure, in performance budget emphasis is laid on the purposes of government expenditure. Physical and financial aspects of each programme and activity are correlated by establishingrelationship between outputs and related inputs. The entire scheme of performance budgeting has to operate within theframework of clearly defined objectives which are sought to be achieved through successful implementation of thevarious programmes and activities undertaken by the concerned department or agency.
 
FISCAL MANAGEMENT TECHNIQUES.
DEVOLOPEMENT MANAGEMENT AND FINANCE Page 3
Formulation of Objective
A performance budget is an annual planof action for achieving, through the implementation of various programmeand activities, the early defined objective of the organization concerned. It is imperative, therefore, that the objectivesof the
 
organization are spelt out In concrete term as prelude to preparing the performance budget. The organizationconcerned must determine ahead of time as to what It wants to achieve during the budget year. Then only it canproperly frame its programmes and activities for the accomplishments
 
of its objectives.The financially feasible and clearly defined objectives provide the necessary basis for the preparation of aperformance budget. They set I the framework for the identification of suitable programmes, activities or projects,
 
which the concerned organization would need to undertake for foe achievement of a Public Works Department shouldbe known to it In clear and well-defined wins as to construct for which funds have been Prided. It is then only that itcan identify and frame various programmes and projects for Implementation to achieve the objectives. This would alsoenable the public works Department to icarporate these programmes and projects in the programme/activityclassification which it prepares as part of its performance budget. An example- of such a classification could be thefollowing:Programme/Activity Classification: (Public Works Department)1. Residential Houses2.Buildings for Medical/Public Health Buildings for Law Courts3 Community Centers4. Government Office Buildings5. Shopping Centers6. Direction and AdministrationThe formulation of objectives Is a necessary stage to precede preparation of program in classification structure for aperformance budget
Program me/Activity classification
 A meaningful activity classification needs to incorporated in the performance budget so a to facilitate achievement of the objectives of this
 
organization. The manner In which a budget
is
arranged reflects to a large e; tent the thinking oi
 
the budget administrators. The form of budgeting matters Importantly In the kind of calculation^ that enter into andthe outcome expected from the budget. Its classification bring out the main purpose it Is required to accomplish.
 
Programme/Activity classification evolved for a performance budget should fully explain and be In line with theobjectives sought to be achieved through the expenditure of budgeted funds.Different types of budget classifications have been evolved to serve diverse purposes, such as. object orline-Item classification, economic classification, functional and programme classification.
M
o single budgetclassification has been found to serve equally well all the purposes, as for instance, control over Inputs, depleting wellthe

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